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Smith & Wesson Holding Corporation (SWHC), Sturm, Ruger & Company (RGR): Gun Stocks Soar as Debate Continues

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If there’s one thing investors have learned from the national gun debate, it’s this: when consumers feel something may be taken away, sales skyrocket. Especially when that something is an item they’re passionate about. Like firearms.

Smith & Wesson Holding Corporation (NASDAQ:SWHC)

So when Smith & Wesson Holding Corporation (NASDAQ:SWHC) released its fourth quarter earnings report, no one was surprised to learn sales shot up 38% to $179 million. The company has experienced a sales increase of 43% over the past year, with sales surging after major tragic events.

Fear drives sales

Smith & Wesson Holding Corporation (NASDAQ:SWHC) noted that the Newtown shooting seemed to spawn the biggest round of purchases. In fact, nine out of ten of the busiest days for background checks in history followed that shooting. Sales also increased following last summer’s shooting in a Colorado movie theater. Analysts believe this can be tied to two things: citizens’ needs to protect their families, and public outcry for increased gun control.

As gun enthusiasts began to worry the government may someday take guns away, Sturm, Ruger & Company (NYSE:RGR) started seeing higher demand for its guns as well. The company reported a 53% increase in earnings for its first quarter, even higher than that reported by Smith & Wesson Holding Corporation (NASDAQ:SWHC).

Both Smith & Wesson Holding Corporation (NASDAQ:SWHC) and Sturm, Ruger & Company (NYSE:RGR) sell a wide range of firearms, including semi-automatic weapons. As lobbyists continue to call for a ban on assault weapons, gun aficionados are stocking up on these weapons in case they might be off the market.

Perhaps the biggest challenge for companies like Sturm, Ruger & Company (NYSE:RGR) and Smith & Wesson Holding Corporation (NASDAQ:SWHC) is keeping up with demand. Hunting retailers like CABELA’S INC. DL-,01 (FRA:DBQA) have seen growth in sales as customers shop for firearms. Keeping enough guns and ammunition in stores has proved challenging for both retailers and manufacturers.

Ammunition in demand

Sales of Winchester Ammunition helped Olin Corporation (NYSE:OLN) with its 27.5% increase in sales. The company said sales began an upward climb just before 2012 election day and have been high since. The company reported an increase of more than 190% in quarterly year-over-year earnings and analysts expect sales to remain high for the rest of 2013 and beyond.

Winchester rifle sales are holding strong as well, although its Model 70 Classic bolt action hunting rifle is often overshadowed by Remington. Its nostalgic factor makes it a favorite of collectors, though, and it has long held the nickname, “the rifleman’s rifle.”

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